Monday, December 03, 2012

Lawyers can support tax justice

The ability of multinational
corporations to shift profits between jurisdictions to minimise their tax bills
has a profound impact on the global economy. Poor countries are being deprived of
huge amounts of revenue that could be channelled into alleviating poverty, as Christian
Aid reports. Richer countries are affected too – in the UK for example,
estimates of the gap between taxes owed and collected are now as high as £120bn
a year, far outstripping planned government spending cuts.

Corporations argue that their
behaviour is legal. They are backed up by their lawyers, who say that their
mandate is to reduce their client’s tax liability. “Tax avoidance is something
that is advocated and taught during legal training,” one lawyer recalled. But growing
public anger in rich and poor countries at revenues lost through tax dodging by
multinationals and individuals is shifting the goalposts. A recent report by Corporate
Citizenship found
that the distinction between tax evasion (which is illegal) and tax avoidance
(which is lawful) has dissolved in the eyes of governments, NGOs and citizens.

In order
to boost revenue from multinationals operating in developing countries, the law
could side-step the distinctions between tax avoidance and tax evasion and
focus on ‘tax abuse’. This approach is being taken by an International Bar Association Human Rights Institute
task force, looking
into the relationship between illicit financial flows, poverty and human rights.
It is asking how a more effective and equitable tax system can help eradicate
poverty and what new approaches can be taken, to generate revenue for
development and promote good tax governance. It is also investigating whether
tax abuses are an infringement or violation of human rights under international
law.

The main value of the task force’s work will be making
the connection between tax abuse and human rights. It will publish a report in
2013, to encourage lawyers to take up different aspects of the problem. But the
task force understands that corporate tax
abuses are only part of the problem. Tax abuse by individuals is also a major issue.

Lawyers
can support campaigners all over the world who are demanding that governments
meet their obligations to collect taxes and enforce existing laws. For example,
they have a duty to warn corporate clients about the damage to their
reputation that tax abuse can cause. Disputes with tax authorities can drag on
for years, costing time and money. Even if it is legal, tax avoidance can
generate bad publicity and public outrage, as corporations targeted by UK Uncut
have discovered.

Lawyers
can also support the moves in the EU and individual countries towards greater
exchanges of information and stronger transparency laws. This would go a
long way towards ensuring that multinationals pay the right amount of tax in every
country in which they operate and that individuals do not abuse tax systems.

·You can read more about this in Fare Shares, a
feature on the Lawyers for Better Business website at www.l4bb.org

·Adrienne Margolis is founder and editor of
Lawyers for Better Business, a website and network to help lawyers become
champions of corporate responsibility for human rights.

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About Me

The Tax Justice Network (TJN) is an international, non-aligned network of researchers and activists with a shared concern about the harmful impacts of tax avoidance, tax competition and tax havens.
www.taxjustice.net